Coal Age

AUG 2016

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12 www.coalage.com August 2016 news continued some time to go to get inventories at coal mines and utilities at a level where we can get a good response." Craft continues to believe that low natural gas prices, a bane to coal for the past few years, are bound to rise, at least to the lev- el of $3/MMBtu or so, at which "we can compete very effectively and get our production levels back to what we enjoyed prior to this year." Gas prices were hovering around $2.75/MMBtu in late July. More good news, Craft said, is that Alliance is starting to see positive signs in the long-moribund coal market, thanks in part to hot summer weather across much of the U.S. and slightly increas- ing gas prices. "We expect these factors will help us," he said. In response to a question about whether Alliance may make a coal industry acquisition in the next 12 to 18 months, Craft said that potential scenario is "hard to handicap." While Alliance is open to such opportunities, "two things have to happen. One, you have to have a favorable lending environment, and two, you have to have sellers that are willing to be reasonable as to the value ex- pectations that they have for their assets." In a research note, Stifel analyst Paul Forward said Alliance's quarterly earnings were higher than expected and primarily driv- en by the company's Illinois Basin division, "where higher pric- ing ($51.78/ton vs. our estimate of $50.50/ton) and lower costs ($27.99/ton vs. our estimate of $30.50/ton) drove strong realized margins during 2016." Peabody Inks Deals on Restoration Liabilities Peabody Energy announced July 26 it has come to agreements with regulatory officials in the states of Wyoming, Indiana and New Mexico for mine cleanup responsibility while it continues to progress through its Chapter 11 bankruptcy case. The settlement deals, which it called "super-priority" agreements, will allow the trio of states where it currently has self-bonding obligations to re- ceive cash first in priority up to its self-bonding facility of $200 million. Each state is entitled to a percentage of that amount, based on a proportion of self-bonding relative to what Peabody's total obligations were on April 12, when it first filed for bankruptcy. The debtor-in-possession financing of $800 million approved for the company earlier this year provides financing for up to 18 months as it continues the Chapter 11 process. According to Reuters, that equates to 15% of Peabody's $1.2 billion total self-bonding. Wyoming can receive $127 million; New Mexico, $32 million; and Indiana, $17 million, should the mines in those states go into reclamation while it is in bankruptcy. "Peabody is continuing its actions to restore coal mined lands using best-in-class practices, and we are committed to our recla- mation as we have been for decades," Peabody President-Ameri- cas Kemal Williamson said. "We are pleased to reach agreements that provide additional security toward our reclamation obli- gations and look forward to ongoing discussions regarding Pea- body's reclamation bonding long term." Officials said that, in addition to the states' financial assuranc- es, it will conduct quarterly reclamation activity status meetings and target outstanding bond reductions in the states where the deal has been made. The deals must be approved by a bankruptcy judge. Motions for those will be heard in August. FirstEnergy Closing Units at 2 Ohio Plants Ohio-based FirstEnergy has confirmed it will sell or deactivate its Bay Shore Unit 1 in Oregon, Ohio, as well as units 1-4 of its sev- en-unit W.H. Sammis Plant in Stratton, Ohio. Bay Shore, which provided 136 megawatts (MW ), will close by October 2020. Sam- mis' units collectively represent 720 MW of capacity and will be re- tired in May 2020; remaining units 5-7 will continue to generate a capacity of 1,490 MW. FirstEnergy, which cited challenging market conditions for the decision, said the impacted facilities contribut- ed about 4% of its production last year. No job reductions are expected at either plant. FirstEnergy of- ficials said it will work with any potential buyer about the contin- ued employment of Bay Shores' 78 employees or, if it is ultimately deactivated, provide other opportunities at its facilities. Sammis currently employs 368. "We have taken a number of steps in recent years to reduce operating costs of our generation fleet," said FirstEnergy Genera- tion President Jim Lash. "However, continued challenging market conditions have made it increasingly difficult for smaller units like Bay Shore and Sammis units 1-4 to be competitive. It's no longer economically viable to operate these facilities." The closures are subject to review by PJM Interconnection. Great River Idling Stanton Station Great River Energy (GRE) announced July 15 that it will retire its Stanton Station plant in Mercer County, North Dakota, by next May, citing an uneconomic operating environment. Officials said the 50-year-old facility has already been running on a limited ba- sis. Its nearby Coal Creek Station and Spiritwood Station will both remain open. "After careful consideration of several alternatives, it became clear that retiring the [Stanton] plant was in the best interest of our member cooperatives," GRE President and CEO David Sag- gau said. "We are making every effort to minimize impacts on our employees and the community through this transition." He noted that the company has offered numerous support resourc- es to its 65 workers and will make jobs available at other compa- ny locations. Great River Energy is the majority owner of Midwest AgEnergy Group, the owner and operator of two ethanol plants and related facilities in North Dakota; it also maintains a number of transmis- sion facilities in the state. "We remain a committed partner in North Dakota's energy in- dustry," Saggau said. Stanton Station, which supplies electricity to 28 rural coop- eratives in Minnesota and Wisconsin, has a generating capacity of 189 megawatts and had the capacity at prime levels to burn 800,000 tons of coal annually. It burned North Dakota lignite until about 10 years ago, when it switched to subbituminous coal from Cloud Peak Energy's Spring Creek mine in Montana. OMU Under Force Majeure Owensboro Municipal Utilities (OMU) has been taking contract minimums from its high-sulfur steam coal suppliers for several months under a force majeure declaration that municipal officials said was necessary to reduce bulging inventory levels. The utility buys about 1.2 million tons of coal annually to fuel its 425-mega- watt Elmer Smith power plant along the Ohio River just east of

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